Loading summary
Transcript43 lines
- [00:00]
A
Adobe is turning AI promise into marketing reality, a reality where personalization feels more human, automation feels authentic, and customers feel more connected to your brand. From AI Frenzy to roi it starts with Adobe.
- [00:18]
B
The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across hr, IT and procurement processes, we've reduced costs by millions, slashed repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business.
- [00:47]
A
IBM, you need to make a huge presentation in an hour. Adobe Acrobat uses AI to take all your documents and generate a presentation with a single click. Build slides quickly and streamline the process. Need a last minute pitch deck? Do that with Acrobat. Need to level up your presentation design? Do that with acrobat. You have 30 plus documents that need to be simplified into a proposal. Do that, do that, do that with Acrobat. Learn more@adobe.com Dothatwith Acrobat. Bloomberg Audio Studios Podcasts Radio News well,
- [01:28]
C
there you have it. Fed Chair Jay Powell wrapping up comments roundtable questions at an event at Harvard University. It was a moderated discussion in a Principles of Economics class. Let's take a look at markets. On the back of those comments we actually saw yields fall across the curve as Fed Chair Jay Powell spoke. Look at that down on the 2 year and the 10 year by let's go ahead and call that 9 basis points. We also did see stocks move off their lows of the recession when Fed Chair Jay Powell was speaking the NASDAQ 100 right now up close to 2. 10 of 1%. The S&P 500 intraday up 410 of 1%. The S& P was flat going into this in the NASDAQ 100 was ever so slightly lower. I want to bring in Bloomberg's international economics and policy correspondent Mike McKee. Mike, apart from no selfies with Jay Powell, which seems like a relatively good rule when you are someone like Jay Powell, I want to hear about the big takeaway from this. It really seems like supply shocks shocks have the Fed has little control when it comes to supply shocks such as the one we're seeing right now in oil, is that the big takeaway from him seeking earlier today?
- [02:38]
D
Yeah, if there is a takeaway it would be that the Fed doesn't know what's going to happen because it does have this supply shock that's going to weigh on the inflation rate. It could also, if the inflation rate stays up for a while, weigh on demand. So the Fed is, as Powell repeated several times, well positioned to sit and wait for a while. Now if you look at Fed funds futures, they traded the opposite of where they've been during Powell's comments. They, they now price in some cuts. I'm not sure that's the right reading of this. I don't think the Fed knows yet where they're going to go except that they're going to be on hold for a while. He noted risks to both sides to growth and employment and as well to inflation. But express confidence the Fed will get the inflation down to 2% at some point.
- [03:31]
C
Tariffs have a one time impact on inflation, he said. Inflation expectations remain well anchored. The FOMC will reach its 2% inflation goal and the Fed's tools have no meaningful effect on supply shocks. That doesn't necessarily mean though, Mike, that we will not see and are not seeing an inflationary effect from this more than month long conflict in Iran. What can the Fed do or what will the Fed do if we do see inflation flow through as a result?
- [03:56]
D
Well, it depends on what areas inflation flows into. If it's oil prices, gasoline prices, those are things that the Fed can't do much about. If it starts to get into the broader economy, which it will in the sense that higher diesel prices are going to mean it's going to cost more for your package to be delivered, that sort of thing, and for trucks to resupply the rest of the country if it starts to get into other areas of the economy, they might, might think about a rate increase, but they'll probably do more jawboning than anything else because they feel that at some point the strait will open, the oil will flow again and it may take a while, but inflation will come down. And he made the point that if the Fed raises rates now, the effects are long and variable and could take a year or more to start to hit the economy and the economy might be in a totally different situation by then and the Fed rate move wouldn't be good news. So the Fed is going to be very, very cautious about what they're going to do going forward because mostly they think this is going to be about oil prices. They just have to keep an eye on the rest of the economy.
- [05:06]
C
Bloomberg TV and radio, international economics and policy correspondent Mike McKay. Mike, thanks so much. Well, those higher energy prices in focus, the war in Iran officially enters its second month. Treasury Secretary Scott Besson indicated some optimism about a reopening of the Strait of Hormuz. But that's as President Trump renewed threats against Iran if a deal isn't made soon. Let's bring in Bloomberg Balance of Power co host Kelly Lyons to break it all down. Kelly, the president said the US Is in quote, serious discussions with a new regime in Iran. An Iranian official earlier said there haven't been any direct talks. Do we know who is talking to whom right now?
- [05:43]
E
Well, that's a major question, Tim. Whatever talks are happening are through intermediaries. You have the likes of Egypt, Pakistan, Turkey, all meeting this weekend as they seek an end to this conflict, though representatives from the US And Iran were not at that table. And as you say, Iran contends that they are not talking directly with Washington, Having rejected the 15 point cease fire plan in public that President Trump told reporters aboard Air Force One last night that Iranians had accepted Most of those 15 points that we didn't specify which one. So there's a bit of a he said stick, she said situation here when it comes to the US And Iran. It also is a bit of a good cop, bad cop situation, Tim, except frankly, President Trump seems to be playing both of those roles. Is on the one hand, he is citing good progress in negotiations he says are happening. On the other hand, he's taking to true social and threatening Iranian infrastructure, the energy infrastructure, oil wells, Cargill island, he said all of these things, even water infrastructure through desalination plants could be targeted, according to the president, if the Strait of Hormuz is not open for business, which of course right now it is not. Not so. The escalation risk is certainly there, especially considering thousands more American service members have arrived in the theater. Of course, you had thousands of Marines and sailors aboard an amphibious assault ship. You have more Marines and army paratroopers that have been ordered there. And you have reports in the likes of the Wall Street Journal and the Washington Post that the president is seriously considering putting troops on the ground in some form. The Wall Street Journal talking about the idea of seizing, seizing enriched uranium, something that would likely require ground forces and take some time. You also had the president telling the Financial Times that he would like to take Iran's oil, something that could involve the seizure of Kharg island, which is also something that is likely to need ground forces. Then the other escalatory thing we have to keep an eye on here is of course, the Iranian proxies, the Houthis, who over the weekend launched attacks, missiles and drones at Israel specifically remember how disruptive the Houthis were in the Red Sea beginning back in 2020, 23, very disruptive to commercial shipping. So that poses a threat to the alternate route through the Red Sea that other Gulf nations like the Saudis are using to try to get their energy exports out. So there's escalatory risk at the same time, Tim, that the president is still talking about this diplomatic off ramp. I guess, though, when you still have Iran saying that the claims the president is making around Iran accepting these points, when Iranian officials are calling them excessive and illogical, it doesn't seem like we are necessarily necessarily getting any closer to concrete resolution here.
- [08:00]
C
Bloomberg's Kailey Leinz, more from her and Joe and the 1 o' clock hour on a balance of power. Thanks so much, Kelly. Well, back to markets because the NASDAQ 100 has slipped into correction territory. The sell off in big tech now flashing signals that have marked turning points in the past. Many in Wall street now see the sector as a potential opportunity, pointing to oversold conditions and the likelihood of relief rallies even amid uncertainty tied to the Iran war. For more, let's bring in Denise Chisholm, Fidelity's director of quantitative market strategy. Denise, in your view, is this a turning point? Is this a buying opportunity when it comes to tech?
- [08:35]
F
Yeah, when you look at the data, I mean, there's certainly concerns around the technology sector since it's been such dominant leadership in the markets. But it's interesting when you look at the mathematical setup. We saw this very, very briefly in the tariff tantrum last year, but the sector is not now in the bottom third of its cheapest when you look back to the data since the 60s. And we haven't really been this cheap from a valuation perspective in over 10 years. And look, I mean, there's always the potential that it could be different this time or there's a value trap. But there is a very linear relationship between the cheaper the sector has been historically, the more likely it is to outperform. 70% odds are not 100% odds, but the risk reward forward. When you take a one year time horizon, I can't say if the bottom is in right now, but when you take a longer term time horizon, it does look more like an opportunity. Now that those 70% odds are actually sticky, even if things like operating margins decline or earnings revisions come down, which is kind of a mathematical way to say whatever it is that you're worried about might be partly priced in at this point.
- [09:36]
C
I think what people might be concerned about right now, Denise, is that this sell off looks a little Bit different if you peel back the layers of, you know, quote unquote tech because there's this worry about AI and the idea that, that I will lead to the demise of some in the software industry, the so called SaaS apocalypse. Where are you seeing deals? Because just, just because we're seeing something is relatively cheap doesn't necessarily mean there's opportunity around the corner.
- [10:02]
F
Right to your point in terms of a value trap. Now look, I'll let the first fundamental analysts tackle what will happen to software from a long term perspective. But when I look at the data, you see something very rare historically. You have an industry that's never been more profitable pinned to the 100th percentile of their profitability. And yet what we've seen over the last three months only has been a devaluation such that relative forward PS are now in the almost the bottom decile. So you have this massive disconnect between the valuation in the operating profit that is rare historically. When you look back in all industries to the 60s, you only see this happen 2% of the time. The instances that it happens are things like the financial crisis. So one of the ways that we can sort of tackle this quantitatively is to say well it is different but we have seen a little bit of this movie before. In some ways software is going through its own great financial crisis pricing. Now how has that worked historically speaking now and is only 2% so you can't draw broad conclusions. But we have seen this historically in technology sectors like communications, you know, comm equipment and hardware. Even though we haven't seen it in software, we've also seen it in semiconductors. When you look back historically and it's, you know, in some ways the odds from a go forward perspective, once you're priced like this, what are your odds of outperformance performance over the course of the next 12 months? And what's your average outperformance over the next 12 months? Is, look, it's only 5050, which is hard to say that that's a table pounding buy. It's not, but it is to say that the average outperformance of all these sectors is around zero in the sense that they tend to be at the point where much is priced in and downside might be more or less limited.
- [11:47]
C
Denise, I do want now. Yeah, go ahead.
- [11:50]
F
The technology sectors like semiconductors and comm equipment have actually had higher odds of outperformance which gets to a little bit of what Chair Powell was talking about, which is technology as a sector has a history of reinventing itself. And yes, there may be in fact bankruptcies within the software industry, but there might be companies that are actually coming in to create new products as well.
- [12:12]
C
I understand the urge to, to use history as a guide here but. But I do wonder for those people who are out there who say wait a second, we are on the verge of a new industrial revolution. We are seeing something with AI that we've never seen before in modern investing and in the modern economy. Do you have to throw the history textbook out the window or the market's history textbook out the window in an environment like this?
- [12:38]
F
Well, I'm always struck by the fact that it is always different this time, right? Covid was very different, tariffs were very different, and yet the patterns are very sticky. I do think that there's always a knee jerk reaction behind. You know, equity markets need to be reflective of very good times in the economy or no existential risk. But when you study history, you know, you see over and over again that sometimes the market goes up and climbs the wall of worry despite whatever you are worried about ending up coming to fruition. And I do think that, that what is the definition of this cycle when I look at the math is that the equity market has remained much more fearful on an ongoing basis than we see in most credit markets which are tend to be the smarter markets. You know, more you see that fear and that knee jerk reaction, the more likely the market is to be higher. Not to say over any three month time horizon, but it is to say over any long term time horizon. So yes, could it be different this time? But I think think history shows you that those differences might end up being tailwinds that you don't suspect like productivity, like higher GDP growth, like higher earnings growth, like more profitability in the overall market as well.
- [13:45]
C
I'm taking a look at WTI crude. It's up to $102 a barrel. Brent is at about $112 a barrel. To what extent are high energy prices a drag on the tech industry?
- [13:56]
F
On the tech industry? You know, in some ways you can think of it as a cyclical industry. So I think it's pro cyclical in the sense that it's tied to the US economy overall. I mean energy prices are interesting in that I understand why the knee jerk reaction is to look at real energy prices over time and we've seen them Spike in obviously 1980 and even the high in 2008 from a real inflation adjusted perspective was nominally higher, was actually higher than the peak in 1980. So you draw those peaks and you say that there's real, very strong correlation to very uncomfortable economic situations. But it is quite different. Right? History can show you what the similarities are and also the differences, which is to say that oil intensity has actually declined substantially in the overall economy. So that effect on the same price might actually have a much less impact than you think on the overall economy. And in some ways, to think about it in very practical terms, instead of just practical oil prices, to think about the stress that it could impact on corporate profits. Specifically when we're talking about equity prices, if you renormalize those oil prices in relation to corporate profits, you'd see that that spike in 1980 effectively was $1,000 in terms of the price per barrel that it would take to equate the same stress. Which is not to say that higher energy prices don't take a bite off the US Consumer. They do. You see declines in real income growth and especially over the short run, demand is relatively inelastic. But what you do see is I think that the comparisons to the 70s and 80s of stagflation, this is a very different economy and it might be much more absorbable than you think, which might mean back to technology that more of that is priced in than you may think.
- [15:38]
C
Okay, some really good historical context. Denise Chisholm of Fidelity Investment Mint. Thanks so much for joining us on Bloomberg Tech. Well, coming up, NASA is preparing to send astronauts back to lunar orbit for the first time since the 1970s. It's a critical milestone for broader US space ambitions. We'll discuss that next. This is Bloomberg Tech.
- [16:03]
A
Effective marketing is smarter, not louder. Cutting edge technology alone won't deliver better experiences or outcomes. Adobe helps marketers use data and AI to drive smarter engagement, reduce noise, and use AI effectively and responsibly. The brands winning in the AI era aren't the ones chasing every trend. They're the ones with the right systems and strategy. It's time to lead with insight, agility and innovation. It starts with Adobe.
- [16:34]
B
So there's a lot of noise about AI. But time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a global workforce of 300,000 can use AI to fill their HR questions, resolving 94% of common questions, not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM foreign.
- [17:09]
G
From iShares, you get access to both monthly income and growth potential in one simple ETF. It's the best of both worlds. Discover Bali iShares Large Cap Premium Income Active ETF iShares the market is yours. Visit www.ishares.com to view perspectives for investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing. Risks include principal loss and the use of derivatives, which could increase risks and volatility. Monthly income is not guaranteed. Prepared by BlackRock Investments, LLC.
- [17:36]
C
Some news in Elon Musk's world, a top judge in Delaware said she will no longer preside over a handful of lawsuits involving Musk and his companies and will reassign several Musk related cases. This comes after the billionaire's lawyers alleged she had shown bias against him after she had ruled against him in high profile cases. Well, NASA is sending astronauts back to the moon for the first time in over 50 years. The lunar flyby will test the Artemis 2 spacecraft, paving the way for a lunar landing in 2028. Let's get more on this historic mission from our reporter Lauren Grush at NASA's Kennedy Space Center. Lauren, good to have you on the program, especially joining us from Kennedy Space Center. I think if we think historically about the moon mission, when we did this 50 years ago, we were locked in this space race with the Soviet Union, a very different time now. Why spend so much money to go back to the moon?
- [18:28]
H
Well, I think it just depends on who you ask. You know, recently there has been a lot of concern brought up about the fact that China is also sending astronauts to the moon. And so you'll hear lawmakers and even, you know, NASA executives talk about the need to beat China to the moon. There's been concern that maybe they will get there first and kind of stake a claim to that area, preventing our exploration of it, but for more peaceful reasons. You know, there's a lot that NASA hopes to gain from the moon. For instance, there's this idea of jumpstarting a lunar economy, so finding ways to make money off the moon, possibly for an economy around the moon. And then, of course, it's learning how to live off of another planetary body. That's no small, small feat. And eventually, you know, the goal is to get to Mars and so learning to live off of the surface of the moon. Those lessons can then be applied to Mars living someday.
- [19:26]
C
Lauren, how is this a test for NASA in an environment where there's, you know, significant investment in the private space industry, namely in a company like Space X, which is expected to IPO this year. What does this mean for NASA? What's at stake?
- [19:39]
H
The unique thing about Artemis is that it is kind of a, an amalgam of the old and the new. Right? So they are using a lot of their long time, long term contractors like Boeing and Lockheed, which will be on display play with this mission and with when it comes to landing on the moon, NASA has contracted and outsourced the lander development to newer players like Space X and Blue Origin. So it's actually kind of a mashup of the old and new way of doing business. And so it'll be a test to see if those, if those companies can work together in this and these different contracting mechanisms can actually, you know, work together to put people back on the surface of the moon.
- [20:19]
C
Bloomberg's Lauren Grosch live at Kennedy Space Center. Thanks Lauren. Check out her reporting and the entire team's reporting on the Bloomberg terminal and@Bloomberg.com more on space with the Space X IPO this time. That's next. This is Bloomberg Tech. Let's pivot now to the business of space as investors gear up for the highly anticipated mega IPO from Space X. Joseph Alagna is the founding partner of Buttonwood Funds. It's invested in the Elon Musk led company four times in the past year and a half. Joseph, good to have you on the program this morning. I want to start with a potential $1.75 trillion valuation at an IPO that raises a whopping $75 billion which our team reported last week. Would this represent a satisfying, satisfying valuation or any exit for you at Buttonwood Fund?
- [21:17]
I
I don't know if we would exit or not. I mean we're about to go public in a few weeks so I can't really talk about what we're going to do and going forward. But you know, the $1.75 trillion IPO valuation was, was announced right after the merger with Xi and you know, before that was 1.5 at the end of last year before they talked about the merger. But no one's really talking about, about the addition of Terrafab yet what that impact has and I do think that that is going to be a game changer for, for Space X.
- [21:48]
C
Why do you think that'll be a game changer?
- [21:51]
I
Well, he really has the total ecosystem now with Terrafab. He no longer is going to be dependent on chips from Nvidia. Might be one of the reasons why you're seeing, you know, Nvidia stock act the way it is. Elon Musk is the Type of guy that does not like to be dependent on other companies. Look what he did with the Tesla, you know, with, with the gigawatt factories. You know, he didn't want to be buying batteries and be dependent to, to other companies. So it's, it's, it's the same playbook that I think he's doing right now with whether it's Space X and building a significant infrastructure play in space and artificial intelligence like no one's ever seen.
- [22:28]
C
Okay, so that raises a really important question, Joseph, what you are, what are people investing in? If they invest in, in Space X in the ipo, are they investing in a near monopoly in space? Are they investing in an AI company, a telecoms company, or is it Elon who they're investing in?
- [22:45]
I
Well, I always say it's Elon because there really is no one else out there quite like him. But you know, what he's put together here with a space, you know, and the combination here and infrastructure play, he's got a moat now that, that, that's built around him that makes it very difficult for any other company to really, truly be a competitor. You know, we've seen other companies like Amazon try to compete with Space X as far as their starlink division is in the satellite, you know, deployment. But now things are quite different. The ecosystem he has now built, I don't think anyone is going to be able to touch.
- [23:24]
C
You did mention you're a little limited in what you can talk about because of your fund going public in the near future. Can you give us some more color around a timeline there?
- [23:33]
I
We expect to probably start trading in May, possibly early June. Space X is one of 11 positions within the Butwood First Access fund that we're bringing public. The second, second largest to Anthropic, but we also had Xi as a position in the fund and now they merge together. But they're still slightly less than our position in Anthropic, which is the largest.
- [23:58]
C
There are other funds that do give access to public market investors in privately held companies. What makes Buttonwood different?
- [24:07]
I
Yeah, you know, we're starting to see this trend now, right, of public vehicles that own public companies that are like, you want to call them the pre IPOs. You know, what makes us different, I believe, is, is really the timing that, you know, that we've invested in some of these companies. And, you know, I think when you look at some of these other vehicles that might have similar portfolios to ours, you know, I think you have to ask yourself, well, you know, the portfolios might look similar but you know, when did management purchase these securities that might not do anything for someone that steps in and buys a portfolio that's that looks the same as another portfolio now. But it should give you some insight on management ability to identify companies in the future because obviously all these funds, including mine, will be adding other public private companies, you know, pre IPO companies in the future.
- [25:00]
C
You mentioned Anthropic. You have invested in Anthropic over the past year and a half and you would give access to, access to investors to that through this fund. Where do you see Anthropic playing differently than Xi?
- [25:13]
I
Xi's got a long way to go to catch up to Anthropic and I don't know if they have a will. You know, Anthropic is really, you know, focused on the enterprise customer and that was a very smart move by them, you know, and the reason why we chose Anthropic, you know, over a year and a half ago is when, you know, everyone's very concerned, concerned about artificial intelligence and how we can, you know, run, run, run a miss and you know, they have guardrails that they put on with that constitutional AI and they've been taking a different approach to artificial intelligence than say some of the other companies that are out there that are really just looking for growth. So you know, that's probably why you see the Anthropic grow so quickly right now is going to have capital that I think that they needed. I think they were having a hard time competing with the Joseph and Chat.
- [26:06]
C
We got to run up against the clock. Appreciate you joining us. Joseph Alana, managing member and founder partner of the Buttonwood Fund. That is going to do it for this edition of Bloomberg Tech.
- [26:15]
A
If you follow markets, you know the value of long term thinking. You plan, you diversify, you prepare for volatility. But in life, even the best strategies can't prevent every bad day a fire, a loss, a disruption that demands immediate attention. When that happens, what matters isn't just what you planned. It's who shows up. That's where Cincinnati Insurance comes in. For more than 75 years, they've helped individuals and businesses navigate life's toughest moments with care, expertise and personal attention. Together with independent agents, Cincinnati Insurance focuses on relationships, not transactions. Their approach is grounded in experience, follow through and trust built over time. Bad days happen. And when they do, you deserve an insurance partner who understands risk, respects what you've built and is ready to help you move forward. The Cincinnati insurance companies let them make your bad day better. Find an independent agent@cin fin.com foreign.
- [27:20]
G
From iShares. You get access to both monthly income and growth potential in one simple ETF. It's the best of both worlds. Discover Bali iShares Large Cap Premium Income Active ETF iShares the market is yours. Visit www.ishares.com to view perspectives for investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing. Risks include principal loss and the use of derivatives, which could increase risks and volatility. Monthly income is not guaranteed. Prepared by BlackRock Investments, LLC.
- [27:46]
C
Deadlines shift, plans change and sometimes you just need promo products fast. Turn to 4imprint 4imprint has hundreds of promotional items available with 24 hour turnaround from custom apparel and drinkware to trade show gear, writing tools and more. And their 360 degree guarantee promises your logo will be printed with care, your order ships fast and it'll show up right and on time. That's the certainty of 4imprint. Check out the full 24 hour selection at fourimprint. Com for Imprint for certain.